Novice investors are often perplexed by jargon and wish to learn how to trade oil quickly and easily. Oil is the most traded commodity in the world. It is traded on the commodity market. The global market is active 24 hours a day and oil can be traded via overseas brokers. The New York Mercantile Exchange (NYMEX) is the world’s largest physical commodity futures exchange. You can opt for either a full size contract (containing 1,000 barrels or $1,000 per dollar move on each contract) or a half size contract of 500 barrels.

Several overseas Forex brokers use contracts for difference (CFDs) for oil trading. Oil CFDs follow either the London oil spot price or the US futures contract for the nearest month. CFDs are traded in pips, which is a measure of market increments and reflects price changes. A change of 100 pips in oil prices represents a move of one dollar.

How to Trade Oil: Process
People wondering how to trade oil can follow three easy steps:

1. Open an account. Several Forex brokers offer oil trading facilities. Brokers assist investors in accessing the commodity market. The minimum amount required to open an account differs among brokers.
2. Determine the margins offered. Trading on margins means that for any given cost, an investor can gain amplified exposure to oil.
3. Buy an options or futures contract. These contracts allow you to buy or sell a pre-specified amount of oil on a specific date and at a predetermined price. For example, if you buy 1 contract of October 50 oil, it means that you have the right to buy 1,000 barrels of oil at a price of $50 a barrel in October. Alternatively, one can purchase an options contract. With these, one gets the right to buy or sell oil without the obligation to do so. If the price is not in your favor, you have the option of letting the contract expire.

To find out more about how to trade oil, join a trading platform that offers one-on-one training.